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(originally published by Booz & Company)


The Life Cycle of Great Business Ideas

C. SEASHORE: To develop really good ideas, you need to have lots of ideas and throw out the bad ones. And for that you need a culture that is respectful of diversity. When everyone in the room comes from a similar background, it’s very likely they’ll have similar ideas. It may be more difficult to build consensus in a diverse group, but that’s how long-term positive results are achieved. Conformity will lead to success only in the short term. In this results-driven culture, we’re finding out how difficult it can be to respect differences and build consensus simultaneously. But they’re parallel processes — if they get out of sync, you’re in trouble. That is, if you build conformity and then throw it out and honor diversity for a while, you’re going to end up with a truly uneven product.

KLEINER: I want to throw in a contradictory perspective, which starts with a quote from the management theorist Elliot Jaques: “Management is in the same state today that the natural sciences were in during the 17th century” — before the discovery of the circulation of the blood.

In other words, there are barber surgeons everywhere, applying leeches and creating theories out of their limited experience and saying, “Well, you know, the leech worked; the company improved. This must be the right way.” And then the next time, the company fails, but the barber surgeon argues that this was an idiosyncratic case; the leech still works.

One could believe that this kind of multiplicity of thinking is the way that human nature, human sciences, and social sciences have to operate. Or one could believe we just haven’t gotten to the circulation of the blood yet. We don’t yet have the unified field theory of knowing how organizations work. And maybe it’s around the corner, or maybe we just don’t have the microscope that can allow us to see it.

ROSENZWEIG: Or maybe it’s the wrong question. I think the analogy of the circulation of the blood is fundamentally misleading — and I’ll tell you why. There’s been a lot of thinking the last couple of years about evidence-based management. Management professors Jeffrey Pfeffer and Robert Sutton have written about this in their excellent book, Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management. However, evidence-based management comes from evidence-based medicine, and there’s a big difference between medicine and management. If you have a ward of patients who are ill with the same disease, and you find a new molecule or treatment that heals one of them, it might heal the whole ward. Or if it’s ineffective, maybe none of the patients will get better. The recovery of each patient is independent. That’s fundamentally different from the performance of a company in a competitive marketplace, where performance of the organization is relative and not absolute.

When we ask, “What works in all companies?” we’re looking for an absolute formula in a field — competition in a marketplace setting — that is inherently relative. The answer is, “There isn’t one formula.” If everybody in the industry follows the same prescription, they won’t all be successful. Once we accept this, we’re in the realm of making judgments under uncertainty that are different from the judgments our rivals make. If everybody knew how to be different from their rivals in the best way and everybody did it, they would no longer be different from their rivals. That’s why P.V.’s comments are so instructive. He told a great story about having very little experience yet achieving great success. Some people may look at that and say, “Wow, I guess the way to be successful is to hire a novice. It seemed to work here.” I would guess the reason why his company has been successful is not because of those things. He has probably made some very shrewd decisions and executed them very well. And that gets a little lost in this nice story.

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